Time for the big one or: Quo Vadis, America?

I... don't think so. As a matter of fact, they might even pull the plug on the US of A, if they don't start acting responsibly anytime soon.

If that happens, we stop buying cheap Chinese crap, and China's entire economy leaps backwards into the stone ages.
 
Yeah, right. If you're going down, you'll take everybody with you :rolleyes: How about not going down in the first place?

What currently happens in Washington, is not worthy of the way I have percieved the United States Of America for about 40 years of my life. And I'm quite sure most Americans feel the same way but I still doubt they are also ready to face reality in its full extent.
I wrote in this forum about two years ago, that the whole American nation has been living beyond its means for decades and that therefore everyone will have to cut back on personal wealth eventually. There was a price tag attached to all the borrowed wealth.

The day has come, the check is on the table. The meal is eaten, it was delicious and lush but now it has to be paid for. I hope that the political elite of the USA is intelligent and decent enough to recognize that. Otherwise we're all in big trouble. Although some probably more than others.
 
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Pah fiscal responsibility. We'll all go down. Then in a decade or so well start working our way out of it. There is ~80-90 year cycle of economic depression. We are about to hit it.
 
Maybe you're right. But I can guarantee you, that the USA will not emerge as #1 anymore, if that happens. Probably not even #2.
 
Maybe you're right. But I can guarantee you, that the USA will not emerge as #1 anymore, if that happens. Probably not even #2.

Political power changes too. The US was far from the big dog at the start of the 20th century. The U.S. does have a vast amount of resources though, and a safe border (two oceans, a non violent Canada, and a corrupt and weak Mexico). The U.S. also has a fairly homogenous culture.

India and China will be the ones to look for in terms of big powers. Though I'm thinking more of China than India.
 
I suppose the US Republicans still haven't learned their lesson and still haven't comprehended the situation their country is in.
Fixed that. ;)

What currently happens in Washington, is not worthy of the way I have percieved the United States Of America for about 40 years of my life. And I'm quite sure most Americans feel the same way but I still doubt they are also ready to face reality in its full extent.
In most polls, over 40% of Americans say that the debt limit shouldn't be raised. Which proves that a large portion of Americans probably learned everything they know about economics from Fox News. It's almost funny that all these so-called deficit hawks are willing to force a default when one thing that defaulting would certainly do is put us in more debt.

Pah fiscal responsibility. We'll all go down. Then in a decade or so well start working our way out of it. There is ~80-90 year cycle of economic depression. We are about to hit it.
Just because it's been a long time since the last serious depression doesn't mean we're in for another one. And if it does happen in August it won't be because of economic greed, mysterious market forces, deregulation, whatever, it will be because Republicans think that destroying our economy will get them elected in 2012.

If that happens, we stop buying cheap Chinese crap, and China's entire economy leaps backwards into the stone ages.
:lol: And we'll all be naked and deprived of consumer electronics.
 
Just because it's been a long time since the last serious depression doesn't mean we're in for another one. And if it does happen in August it won't be because of economic greed, mysterious market forces, deregulation, whatever, it will be because Republicans think that destroying our economy will get them elected in 2012.

There was a big depression in the 1850s, another big one in the 1780s. Different reasons but a cycle nether the less.

Anyhow I found this of interest.

Brazil
Fiscal prudence goes local

CAMPO GRANDE, the capital of the state of Mato Grosso do Sul, is usually a tranquil place. The state?s business is mostly farming, cattle and soyabeans, on flat bushland; city life, as offered by Campo Grande, is clean and rather dull. In recent weeks, however, the state government?s offices have had a spate of bomb threats. All were hoaxes, but they seemed intended to tell the governor, Jose Orcirio dos Santos of the left-wing Workers? Party (PT), that he had infuriated some people with his programme to cut spending and reform the state?s finances.

Mr Santos?much better known as ?Zeca of the PT??became governor early in 1999 and, at first, behaved as you might expect of a former trade unionist whose party is the main opposition to Brazil?s government and its ?fiscal adjustment? programme. He promised to ?govern for the workers? and gave big pay rises to teachers, health workers and police, taking the state?s already precarious finances closer to the brink.

Then, suddenly, he did an about-face, launching a programme to reduce spending while boosting tax collection. The number of political appointees in the state government has been cut in half, to 1,600, and thousands of permanent staff are being offered voluntary retirement. Loss-making state firms have been shut. Tax-dodgers are being pursued more assiduously, over-generous tax breaks to the state?s big meat-processing industry are being scaled back, state workers? pension contributions are being raised. As a result, the state?s finances have swung from a primary deficit (ie, a deficit even before paying debt interest) to a primary surplus.

Sao Paulo
Mr Santos?an emphatic man who shouts rather than talks, stabbing his finger, as though he is still addressing one of his union rallies?claims, improbably, that he has always believed in sound finances. But what seems to have forced his conversion is Brazil?s new fiscal-responsibility law, which came into force last May. This bans the federal government from bailing out debt-ridden states and cities, as it has done repeatedly in the past; it limits federal, state and municipal borrowing and payroll costs; and it bans politicians from leaving their successors a stack of unpaid bills. Offenders may be banned from office or even jailed.

The governor?s example is now being followed by the mayors of the state?s 77 municipalities, says Adilson Trindade, political editor of the local Correio do Estado. They are scrambling to comply with the new law, cutting their own and councillors? salaries, exorcising ?ghost? workers from the payroll and starting to charge local taxes, instead of simply borrowing or living off transfers from the federal and state governments.

The good behaviour seems to be catching. Since early 1999, when Congress started debating the fiscal-responsibility law, the states have gone from a primary deficit to a primary surplus; and the municipalities have stayed in primary surplus (see chart) even in the approach to last October?s local elections, traditionally a time of wild overspending. Raul Velloso, who follows matters of public finance, says most of the improvement has been the result of more efficient tax collection and the higher tax revenues that come with economic growth, as much as of governors? and mayors? efforts to raise taxes. That said, in the past such extra revenue would have been frittered away on grand public monuments and jobs for the boys, not used to stabilise local finances.


Still, such efforts can only be a start, not least because of the burden of debt left behind by previous governors and mayors. In Mato Grosso do Sul, the obsession of Mr Santos?s predecessors with grandiose public works (including a $250m, or 500m reais, Palace of Culture with huge expanses of polished granite flooring) have left the state with debts of 4 billion reais, mostly with the federal government. The repayments it makes under a deal with the national treasury are insufficient to cover the interest on the debt, so the lump sum owing continues to rise. Furthermore, the state has another 4 billion reais of unfunded pension liabilities. Mr Santos has started a pension fund, endowing it by selling a few state companies, but it remains far short of what is needed.

The main danger, says Mr Velloso, is that one of the biggest states or cities may get into such a mess that Congress comes under irresistible pressure to rewrite the fiscal-responsibility law. Fortunately, the finances of Sao Paulo state, by far the largest, were stabilised under the six-year governorship of Mario Covas, who died this week. The wobbliest candidates are the states of Rio Grande do Sul and Minas Gerais and the city of Sao Paulo, all governed by left-wing opponents of Brazil?s president, Fernando Henrique Cardoso. The governor of Minas Gerais, ex-President Itamar Franco, triggered Brazil?s 1999 devaluation by threatening to default on his foreign debt; but after having his federal grants stopped by Mr Cardoso he relented, and has since been paying his bills. Sao Paulo?s new mayor, Marta Suplicy, whose incompetent predecessors left 18 billion reais of debts, has so far seemed determined to bring the city?s finances under control, conscious that her progress will affect her hopes of running for president in 2006.

Mr Santos insists that Brazil?s recent conversion to fiscal rectitude is permanent. ?The era of the big-spending state is over,? he says. That really depends on the politicians Brazilians choose to lead them in future. A promising sign, says Mr Trindade, is that in Mato Grosso do Sul, as elsewhere, last October?s municipal elections seemed to continue a trend in which voters have rewarded competent mayors and rejected populists. The governor will run again next year and, so far at least, no rival has come forward offering a return to the free-spending past.

http://www.economist.com/node/526566
 
In the UK the media, public and ruling party never stop going on about how Labour got us into the financial mess we are in. It is like the goto putdown thrown at any Labour politician trying to criticise the current government.

Yet in the US it seems like everyone has forgotten that it was the republicans who got it into the mess that it is in currently, two years since Bush and all the people who were at the top of the GOP are still at the top, yet nobody will call them out on it.
 
Yeah, right. If you're going down, you'll take everybody with you :rolleyes:
Gyvon was simply stating a fact. If Americans don't have the money, because China has pulled the US credit forcing millions out of work, how are they going to buy stuff? On credit?
 
Yet in the US it seems like everyone has forgotten that it was the republicans who got it into the mess that it is in currently, two years since Bush and all the people who were at the top of the GOP are still at the top, yet nobody will call them out on it.

No, both sides got us into this mess. Both parties are horrible.
 
No, both sides got us into this mess. Both parties are horrible.

That they are both horrible doesn't change the fact that public debt exploded under Bush and a Republican congress. Democrats don't often claim that they are the Fiscally constrained party but Republicans do, the stats just don't add up to that claim and nobody is calling them out on it.
 
The World from Berlin

'The US Is Holding the Whole World Hostage'

With no solution to the US debt crisis in sight, the rest of the world is starting to get nervous. German commentators urge congressional leaders to get their act together. A US default would have catastrophic consequences, they warn.

Both Moody's and Standard & Poor's are threatening to downgrade the country's debt amid fears of a national insolvency. But for once it is not a debt-stricken euro-zone member that has come into the crosshairs of the powerful rating agencies. This time it is the United States, the world's largest economy, that is at risk of going bust .

The US needs to raise its debt ceiling, currently set at $14.3 trillion (?10.1 trillion), by Aug. 2, otherwise the country will run out of money. But negotiations between President Barack Obama and top Republicans and Democrats have so far failed to make progress.

Obama has now given congressional leaders until Saturday morning to reconsider their positions. "It's decision time. We need concrete plans to move this forward," Obama said on Thursday, the fifth day of talks, following an inconclusive negotiating session.

Financial markets, which have previously viewed the negotiations with calm, are beginning to get nervous amid fears that Republicans and Democrats may be unable to reach an agreement by Aug. 2. Any default on the part of the US could have incalculable effects on global financial markets and could hurt the fragile recovery in the US. Moody's and Standard & Poor's have warned they may cut the country's top AAA credit rating if a solution isn't reached.

Republicans want any increase in the debt ceiling to be met by spending cuts equal to the same amount, as well as more serious efforts by the government to address the debt problem. Democrats are open to certain cuts but want tax increases in return. With presidential elections coming up in 2012, neither side wants to be seen as ceding ground.

On Friday, German commentators react with concern to the ongoing stalemate.

The center-right Frankfurter Allgemeine Zeitung writes:

"The bitter debate in Washington about raising the debt ceiling has largely left the financial markets cold. ? The market players apparently expect that an agreement will be reached in time. That's the only possible explanation for their surprisingly calm response."

"We can only hope that the top politicians in Washington take Moody's warning seriously, despite the relaxed response from the financial markets so far. A US default and a lower credit rating would ? send stock prices through the floor and could choke off America's economic recovery -- with global repercussions. The politicians in Washington are playing with fire. A swift compromise is needed. Nobody needs a US default."

The center-left S?ddeutsche Zeitung writes:

"It's actually unimaginable. On August 2, the US could, for the first time in its history, become insolvent because the Republican majority in the House of Representatives refuses to raise the ceiling on the national debt. But until now, everyone is acting as if it will all be OK and the politicians in Washington will come to their senses in time."

"The Republicans are playing with fire. Nobody can imagine what the repercussions might be if the unthinkable happens and the US is suddenly no longer a safe haven for investors. Anything is possible, from a small, barely perceptible amount of turbulence in the financial markets to a global panic. Congress should think carefully about what it is doing."

The conservative Die Welt writes:

"In this period of competing debt crises, America and Europe are looking at each other in amazement, with each side understanding less and less about what is happening on the other side of the Atlantic. While Europe's chaos is obvious to the Europeans and the rest of the world, there are few signs of self-doubt or self-awareness in the US. In the middle of the poker game between the two political parties to prevent a national default on Aug. 2, polls show that 77 percent of Americans believe that they live in the world's greatest system of government. Just as many are convinced that life is only worth living as an American."

"Democrats and Republicans are so hopelessly embroiled in a religious war that compromise and pragmatism are just dreams from a far-off era of reason. ? The influence of the Tea Party movement ? can not be overestimated. ? The movement sees traditional politics as corrupt and regards Washington as a den of iniquity. ? They see the other side as their enemy. Negotiations with the Democrats, whether it's about appointing a judge or the insolvency of the United States, are only successful if the enemy is defeated. Compromise, they feel, is a sign of weakness and cowardice."

The business daily Handelsblatt writes:

"Washington still considers a default to be unimaginable. Obama does not want to go down in history as the president who bankrupted America, so the only alternative is another unsavory deal -- the 'kick the can down the road' solution, as American politicians like to call it. The debt limit will be raised again just before the impending volcanic eruption, exacerbating the problem and postponing an attempt to solve the problem (of the US's enormous debt) to the next, not too distant deadline. Investors are also counting on this scenario. That is the only explanation for the relative calm on the market for US government bonds."

"That will change if the European Union crisis countries manage to sort out their finances, while the US continues with its debt delusions. Then the markets will soon achieve what the politicians have failed to do -- and force the US into an era of belt-tightening."

The mass-circulation Bild writes:

"Playing poker is part of politics, as is theatrical posturing. That's fair enough. But what America is currently exhibiting is the worst kind of absurd theatrics. And the whole world is being held hostage."

"Irrespective of what the correct fiscal and economic policy should be for the most powerful country on earth, it's simply not possible to stop taking on new debt overnight. Most importantly, the Republicans have turned a dispute over a technicality into a religious war, which no longer has any relation to a reasonable dispute between the elected government and the opposition."

"If it continues like this, the US will be bankrupt within a few days. It would cause a global shockwave like the one which followed the Lehman bankruptcy in 2008, which triggered the worst economic crisis since the war. Except it would be much worse than the Lehman bankruptcy. The political climate in the US has been poisoned to a degree that is hard for us (Germans) to imagine. But we should all fear the consequences."

-- David Gordon Smith

Source: http://www.spiegel.de/international/world/0,1518,774666,00.html

Seems like 77 % of all Americans have yet to realize, what's really going on.
 
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Gyvon was simply stating a fact. If Americans don't have the money, because China has pulled the US credit forcing millions out of work, how are they going to buy stuff? On credit?

That, and we can be vindictive bastards when we want to.

Anyways, I'm gonna call exactly what will happen.

Both sides will bicker back and forth like they always do. Then, at the last minute, a deal is agreed to by both sides and the crisis is averted. Democrats and Republicans both claim victory.

It's "Budget Crisis" part II.
 
That, and we can be vindictive bastards when we want to.

Anyways, I'm gonna call exactly what will happen.

Both sides will bicker back and forth like they always do. Then, at the last minute, a deal is agreed to by both sides and the crisis is averted. Democrats and Republicans both claim victory.

It's "Budget Crisis" part II.

Yep.
 
That they are both horrible doesn't change the fact that public debt exploded under Bush and a Republican congress. Democrats don't often claim that they are the Fiscally constrained party but Republicans do, the stats just don't add up to that claim and nobody is calling them out on it.


They have a great PR machine and have better propaganda than the Dems.


Seems like 77 % of all Americans have yet to realize, what's really going on.


Ignorant bliss just before the we see the iceberg through the fog.
 
Sounds like stone ages as well to me :dunno:
That's my point. He said China would be put back to the stone age, but ending US trade with China would probably have a more apparent effect on us in the US.

No, both sides got us into this mess. Both parties are horrible.
Both sides let the housing bubble happen, that much is true. But if we default in August the blame will be squarely on the Republicans.

That they are both horrible doesn't change the fact that public debt exploded under Bush and a Republican congress. Democrats don't often claim that they are the Fiscally constrained party but Republicans do, the stats just don't add up to that claim and nobody is calling them out on it.
There are plenty of people who just take politicians at their word. The GOP uses that gullibility to perpetuate the myths that they're fiscally responsible, that they're making America more Christian, that they're making America safer, etc etc etc. Couple that reality with the fact that Democrats generally suck at aggressive messaging and you've got the current situation.

Seems like 77 % of all Americans have yet to realize, what's really going on.
Most people barely pay attention to what our own government is doing (and most have no idea what the stakes are on this issue), nevermind paying attention to how well other governments function. So they've got no basis for comparison.

*sinking ship*
That about sums it up, I think.
 
Most people barely pay attention to what our own government is doing (and most have no idea what the stakes are on this issue), nevermind paying attention to how well other governments function. So they've got no basis for comparison.

The problem is: Once they've realized what's going on, they won't understand the reasons. And then they will look for someone to blame. They won't sit down and soberly analyze the situation, no. There will be no catching up on reading about what caused he crisis.

Democracy only works on the long run, when the majority of the population is actually interested in and understands what's going on. Leave them alone, let them remain ignorant and uneducated and they will be very prone to radicalization, when the going gets tough. They will be recipient for "easy solutions", for "strong leaders", they will blame the elite that from their point of view lead them into the mess and frankly that's what I'm a bit afraid of.
 
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The problem is: Once they've realized what's going on, they won't understand the reasons. And then they will look for someone to blame. They won't sit down and soberly analyze the situation, no. There will be no catching up on reading about what caused he crisis.
Oh there will certainly be snap judgments among people who aren't paying any attention until a crisis affects them directly. But the (almost) funny thing about this crisis, which has been manufactured by Republicans, is that 70% of Americans will blame a default on Republicans. But that's just further evidence of the GOP politicians substituting rhetoric for reality.

Democracy only works on the long run, when the majority of the population is actually interested in and understands what's going on. Leave them alone, let them remain ignorant and uneducated and they will be very prone to radicalization, when the going gets tough. They will be recipient for "easy solutions", for "strong leaders", they will blame the elite that from their point of view lead them into the mess and frankly that's what I'm a bit afraid of.
Eh, you know despite a largely ignorant populace I think the current crisis is simply a problem of politicians lacking the balls to do what is necessary. We don't have a spending problem, we don't have a debt or deficit problem; we have a revenue problem. Adjusted for inflation, we're paying the lowest taxes we've paid since well before WWII. And we're waging three wars and trying to get out of a recession. But there's no politician out there who will say that, no one (for whatever reason) is willing to say "Reaganomics" is bullshit. The simple fact of the matter is that we need to raise taxes on the rich, close loopholes and cut subsidies in various areas.
 
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